European Economic and Social Committee
INT/632
An action plan to improve
access to finance for SMEs
Brussels, 19 September 2012
OPINION
of the
European Economic and Social Committee
on the
Communication from the Commission to the Council, to the European Parliament, to
the Committee of the Regions, and to the European Economic and Social Committee
- An action plan to improve access to finance for SMEs
COM(2011) 870 final
_____________
Rapporteur: Ms Darmanin
Co-rapporteur: Mr Lannoo
_____________
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EN
-1On 7 December 2011, the European Commission decided to consult the European Economic and
Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the
Communication from the Commission to the Council, to the European Parliament, to
the Committee of the Regions, and to the European Economic and Social Committee An action plan to improve access to finance for SMEs
COM(2011) 870 final.
The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee's work on the subject, adopted its opinion on 30 August 2012.
At its 483rd plenary session, held on 18 and 19 September 2012 (meeting of 19 September), the
European Economic and Social Committee adopted the following opinion by 174 votes, with
3 abstentions.
*
*
*
1.
Conclusions and recommendations
1.1
The EESC welcomes the EU action plan to improve access to finance for SMEs at a time
when many European countries are facing an uncertain economic outlook. The EESC is of the
opinion that Europe's economic recovery can only be achieved if SME policy is high on the
agenda of European policy-makers. It therefore clearly supports the efforts of the European
institutions to increase the resilience of the financial system in order to be an instrument at the
disposal of the real economy.
1.2
The EESC notes that dedicated actions cannot be successful without clear involvement from
the Member States. The EESC therefore invites them to implement the action plan and unlock
all possible support mechanisms for SME finance by concentrating on the priorities of Europe
2020. The Member States should for instance develop guarantee funds and better use
structural funds for financial instruments.
1.3
The EESC acknowledges that loan finance is and will remain one of the most widely used
instruments for SME development. In this respect, the Committee fully supports regulatory
and financial measures aiming at reinforcing debt finance and guarantee instruments for SME
growth.
1.4
The Committee insists that the Basel III proposals must be properly implemented in Europe
with the forthcoming CRD IV Directive, to avoid adverse effects on the financing of the real
economy.
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1.5
The EESC welcomes the Commission proposals on boosting venture capital in Europe. It is
essential for the European VC market to be given decisive new impetus with a view to
overcoming market deficiencies and regulatory barriers, rendering the VC segment more
attractive to private investors.
1.6
European SMEs are varied and heterogeneous. Initiatives to improve access to finance must
consist of a full portfolio of diverse and innovative measures to effectively reach this diverse
group of actors taking into account their specific features. Social enterprises and the liberal
professions, for instance, have different legal forms and models of operation from
"traditional" businesses, which further complicates their access to finance since these forms or
models are not always recognised or understood by financial actors.
1.7
Hybrid capital that presents an alternative to bank lending must be boosted as well. The
emergence of new financial actors must be supported, as must that of new intermediaries
providing both innovative financial solutions and business advice. Crowd funding is a good
example to mention and participative banking could be another option to take into
consideration.
1.8
The EESC stresses the need for the EIB group, in close cooperation with the European
Commission, to play a key role in investing in SMEs, through a full range of general and
targeted instruments. As regards the EIB loans for SMEs, EIB intermediaries are invited to
increase their communication efforts to promote that financial scheme to the SME community
in cooperation with SME organisations.
1.9
The EESC takes note of the proposal to simplify and make more transparent the next
generation of financial instruments (EU Debt Financial Instrument and EU Equity Financial
Instrument) under the forthcoming Multiannual Financial Framework Programme (MFF). The
EESC is supportive of the proposals because of the high leveraging effect of these two
schemes.
1.10
The EESC welcomes the Commission's decision to foster dialogue between different
stakeholders in order to monitor market developments and make recommendations on how to
improve access to finance for SMEs. The EESC hopes to be regularly invited to the "SME
Finance Forum" to discuss and present concrete proposals on how to alleviate SMEs' financial
problems.
1.11
The Committee is of the opinion that specific training for entrepreneurs, such as investment
readiness programmes, should be stimulated.
1.12
The EESC stresses the fact that European programmes supporting SME finance that are
implemented via European, national or regional intermediaries must be made easier for SMEs
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-3to access. Transparent, understandable and consistent procedures at all levels, are the keys to
their success.
2.
Commission proposal
2.1
The action plan outlines the main obstacles to stimulating finance for SMEs such as:



2.2
Furthermore, the documents describe the measures taken between 2007 and 2012 to ensure
financing reaches SMEs, these being:




2.3
access to loans;
access to venture capital;
access to capital markets.
the Competitiveness and Innovation Programme (CIP);
the EIB allocation for SME loans;
Cohesion policy funds;
the Risk Sharing instrument in FP7.
The Commission identifies a number of measures so as to facilitate financing for SMEs.
These include:



regulatory measures;
financial measures to improve lending and venture capital across the EU;
measures to improve the environment for SMEs.
3.
General observations and comments
3.1
The European Central Bank (ECB), in close cooperation with the European Commission,
regularly publishes the results of the "Survey on the access to finance of small and mediumsized enterprises (SMEs) in the euro area"1. According to the results of the latest survey, euro
area SMEs' external financing needs increased between October 2011 and March 2012. At the
same time, the survey results show that access to bank loans continued to deteriorate but with
differences between Member Sates 2 . On balance, firms reported a worsening in the
availability of bank loans. Moreover, the survey results point to somewhat higher rejection
rates when applying for a loan. Meanwhile, the percentage of respondents reporting access to
finance as their main problem remained broadly unchanged. In view of this situation, the
EESC invites the Commission to ensure that alternatives ways to access to finance can be
fully exploited.
1
2
This survey round was conducted between 29 February and 29 March 2012, covering a sample of 7,511 firms in the euro area.
Ibid, see specific figures p.14-15.
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-43.2
The EESC emphasises that each survey needs to be closely followed up in order to respond
rapidly by proposing specific policy measures. Information available at the SME Finance
Forum, in the Member States and from SME organisations can complement this follow-up.
This exercise should be carried out by the Commission with the involvement of the EESC and
civil society.
3.3
The EESC supports the study the Commission is conducting to evaluate the definition of
SMEs and especially asks for specific attention to be paid to micro and small enterprises.
Given the diversity and size of SMEs 3 (family businesses, liberal professions and social
business to name but a few), the EESC reminds the Commission that tailored financial
support measures for them must be a priority. The Commission is therefore requested to take
into consideration their different characteristics, paying special attention to micro enterprises,
when preparing financial programmes to support their development. The Commission needs
to avoid any discrimination as there is no "one size fits all" answer to their needs.
4.
Specific observations and comments on the regulatory measures
4.1
Venture Capital Regulation
4.1.1
The EESC supports the introduction of a harmonised regime for cross-border operations by
VC funds. The proposal is laudable as it is likely to alleviate market deficiencies thanks to the
creation of a "European Passport" enabling EU venture funds to market their products and
raise capital on a pan-European basis. The EESC made a number of comments in its previous
opinion on venture capital4 and asks the Commission to take them into consideration.
4.1.2
The EESC strongly supports the study that the Commission will carry out in 2012 on the
relationship between prudential regulation and venture capital investments by banks and
insurance companies. The study should assess whether these instruments are creating an
oligopoly of large international banks or need to be changed in the medium or long term.
4.1.3 As the majority of SMEs are small businesses (less than 10 employees), the EESC invites the
Commission to pay special attention to micro venture funds. These funds invest in enterprises
whose projects are not attractive enough for the attention of traditional venture capitalists but
are too big or risky to attract capital from traditional lending sources. Such funds strengthen a
company's capital base and develop entrepreneurs' business skills using coaching methods
throughout the investment period 5 . Member States are invited to propose tools such as
specific taxation measures that could stimulate the development of those funds in order to fill
the financial gap.
3
4
5
OJ C 318, 23.12.2009, p.22, OJ C 376, 22.12.2011, p. 51.
OJ C 191, 29.06.2012, p. 72.
See for example Financités: http://www.financites.fr/
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-54.2
Tax reforms
4.2.1
We welcome the Commission's proposals on taxation reforms for cross-border VC
investments. The Committee invites the Commission and the Member States, at the same
time, to propose clear measures to prevent tax avoidance and evasion.
4.2.2
As well as addressing the tax obstacles to cross-border transactions, the Commission should
also ensure that Member States encourage tax reform in their own countries for SME
financing schemes.
4.2.3
Good practices that exist in some Member States should be looked into and expanded across
the EU and disseminated to SMEs6. In a number of countries fiscal stimulus packages are
already in place. An example of these could be Belgium/Flanders, which introduced a winwin-loan a few years ago, whereby individuals can lend money to SMEs and get a tax
reduction in return. Another good example is the Dutch system known as the Tante Agaath
loan7.
4.2.4
Tax exemptions such as France's ISF PME law8 can also be of real benefit to high-growth
SMEs. The EESC is in favour of such schemes as long as the amount of exempt taxation is
reasonable and would not impinge on contributions to other equally important sectors.
4.3
State Aid Rules
4.3.1
The EESC supports the envisaged State Aid Modernisation proposal to simplify current state
aid rules for SMEs. It takes note that the Commission will review the General Block
Exemption Regulation and a number of state aid guidelines, including on risk capital, to
achieve Europe 2020 objectives. The EESC urges that these rules be improved, simplified and
clarified. Our Committee invites the Commission to ensure that state aid is only used to target
market failure.
4.4
More visible SME markets and listed SMEs
4.4.1
The EESC welcomes the fact that the MIFID directive proposes to develop homogeneous
SME growth markets and make them attractive for investors thanks to the SME growth
market label. However, the EESC suggests9 laying down specific provisions and measures
which will enable it to be implemented efficiently and effectively.
6
7
8
9
See EBAN report: Tax Outlook 2010 Executive Summary - http://www.eban.org/resource-center/publications/eban-publications.
Tante Agaath regeling (http://www.tanteagaath.nl/agaath_regeling.htm).
http://pme.service-public.fr/actualites/breves/reduction-isf-pour-investissements-pme.html.
OJ C 191, 29.06.2012, p. 80.
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-64.5
Reporting burdens for listed SMEs
4.5.1
The Commission and Member States are invited to reduce accounting rules and reporting
burdens for listed SMEs in Europe. The Committee acknowledges the fact the Commission
presented a proposal for a directive simplifying and amending the Accounting Directives and,
at the same time, a proposal revising the Transparency Directive. The EESC reminds the
Commission to take on board its two opinions issued early in 201210 and feels that SMEs need
to free up resources to invest in their businesses in order to deliver further growth.
4.6
Basel III future implementation and its consequences for SME finance
4.6.1
The EU needs to continue to be at the forefront in implementing the internationally agreed
financial regulatory reforms. The EESC however notes that the various capital requirements
implementing Basel III in the EU coming into force and currently being discussed (CRD
IV/CRR) may cause various problems for SMEs11.
4.6.2
The EESC supports the efforts of the European institutions to increase the resilience of the
financial system, in order to avoid future crises. However, more regulation of the financial
markets therefore cannot be made at the expense of the financing of small and medium-sized
enterprises. The EESC fully supports the "Karas Report" adopted by the European Parliament
in May 2012 which is a further step in the right direction towards a sensible and workable
implementation in the EU of the "Basel III" rules on capital requirements.
4.6.3
The EESC takes note that the Commission will consult the European Banking Authority
(EBA) within 24 months after the entry into force of the new Directive (CRD IV) and that the
EBA will report on lending to SMEs and natural persons. The Committee urges the
Commission to be fully involved in the reassessment of the risk weight by expressing its
opinion on the report to be sent to the Council and the European Parliament.
4.7
Late Payment Directive
4.7.1
The Commission envisages implementation of this Directive by 16 March 2013. The EESC
presses Member States to act to ensure that SMEs can benefit more quickly from the system.
It is also very important for the Commission to monitor the timely implementation of this
Directive in all Member States. Furthermore, the Commission needs to follow-up very closely
the way Member States implement Article 4(5), which gives them the possibility of
lengthening the verification procedure to over 30 days, unless this would be grossly unfair to
the creditor. The Commission should closely monitor Member States to prevent them from
using this article to artificially delay payment, especially since delays in payments by public
authorities have a significant impact on SMEs' cash flow and liquidity management.
10
11
OJ C 143, 22.05.2012, p.78, OJ C 181, 21.06.2012, p. 84.
OJ C 68, 6.3.2012, p. 39.
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4.7.2
In order to set an example, the EESC invites the European Institutions to pay their contractors
on time and avoid imposing unnecessary administrative and financial burdens on them.
4.8
European Social Entrepreneurship Funds
4.8.1
The EESC welcomes the European Commission's proposal for a Regulation on European
Social Entrepreneurship Funds and reminds the Commission that improving access to
appropriate capital for social enterprise needs to be high on the agenda. The EESC expressed
its opinion12 on that issue early in 2012. One of the challenges is the need to measure and
report on the social effects and impact on society of portfolio undertakings. The EESC
recommends undertaking a joint study at EU level in order to develop criteria and indicators
to tackle such issues. The Committee reminds the Commission that such funds can only be
one tool of many much-needed financial instruments that still need to be developed.
4.8.2.
The EESC also invite Member States to improve the recognition of different forms of social
enterprises. If they had greater recognition, these businesses would see a reduction in the risk
weight for loans granted to them and would no longer be disadvantaged in this area,
compared to traditional businesses.
5.
Specific observations and comments on EU financial measures for SMEs
5.1.
The Committee is fully aware that a large number of SMEs, particularly smaller ones, will
continue to depend mainly on credits when it comes to external financing.
5.2
The EESC welcomes the sustained activity of EIB SME loans as one of the main SME
lending instruments at EU level, and recognises the financial advantages passed on to the
SMEs to decrease the borrowing cost through these intermediated loans. The EESC invites
the EIB to continue their effective implementation and to report regularly on the results
achieved. In order to reach the expected results, intermediary banks are requested to increase
their communication efforts to better promote these loans to the SME community in close
cooperation with SME organisations.
5.3
It is equally important to support the emergence of new forms of intermediary, which in many
cases better suit the diversity of SMEs. Experiences from the cooperative and social banking
sectors are valuable, since they offer tailored financial support often coupled with other
support services.
5.4
The EESC invites the Commission to expand risk-sharing facilities for equity and quasiequity investments, in close cooperation with the EIB group, and to support the issuance of
pooled corporate bonds. As regards the quasi-equity market, the EESC particularly invites the
12
OJ C 229, 31.07.2012, p. 55.
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-8Commission and EIB group to explore ways to improve mezzanine finance and look into new
mezzanine products, such as a guarantee for mezzanine loans.
5.5
The EESC recommends that the European Commission continues the promotion of EU
financial schemes with SME organisations in order to ensure higher visibility and rapid takeup for these instruments especially for Member States which are still lagging behind. Since
effective financing of SMEs can be seen as one of the most important tools in the "Growth
Pact", the subject should be properly addressed in the National Reform Programmes.
5.6
The Committee is of the opinion that specific attention should be paid to supporting SMEs
through the equity and debt instruments provided for by the Programme for the
Competitiveness of enterprises and SMEs (COSME) and the Horizon 2020 programme. The
EESC strongly support to increase the maximum threshold stipulated by the loan guarantee
facility (LGF) in COSME (EUR 150 000) as already stipulated in our former opinion on the
Competitiveness Programme13.
5.7
The EESC stresses the need to have cohesion policy regulations which do cater for a smooth
and efficient implementation of SME programmes as the current framework is not conducive
enough. The EESC regrets that the EU financial regulations are currently too heavy or too
complex, thus creating problems for national intermediaries in charge of implementing them.
There is indeed a clear need for better monitoring of the use of financial instruments under the
Cohesion Policy14.
5.8
It is also important to shift from project financing to more sustainable financing instruments
to avoid public funding dependency. Here the Commission should provide guidance on good
practice in combining and leveraging financial instruments from different sources during all
stages of the SME lifecycle.
5.9
The EESC takes note of the proposal to facilitate access to finance for SMEs in the long term
with new financial instruments (EU Debt Financial Instrument and EU Equity Financial
Instrument) under the Multiannual Financial Framework (MFF) in the form of dedicated
platforms. By pooling resources from various sources, the EESC estimates that financial
instruments can provide a catalyst for investments for identified gaps in the market,
achieve economies of scale and/or minimise the risk of failure in areas where it would be
difficult for individual Member States to achieve the required critical mass. The EESC
therefore invites the Commission to implement the new generation of financial
instruments on the basis of lessons learned from existing instruments (CIP financial
instruments, RSFF). It is important to establish appropriate rules, guidance and
standardisation in accordance with market requirements and best practices, to avoid
13
14
OJ C 181, 21.06.2012, p. 125.
Special Report No 2/2012 "Financial instruments for SMEs co-financed by the European Regional Development Fund" – Report
from the European Court of Auditors - http://eca.europa.eu/portal/pls/portal/docs/1/13766742.PDF.
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overlaps and simplify implementation modalities in order to promote efficiency and
financial discipline. The EESC stresses the fact that adequate monitoring, reporting, auditing
and good governance are of the utmost importance in order to ensure that EU resources are
being used for the purpose intended.
6.
Specific observations and comments on measures to improve the environment for SMEs
6.1
Better information & communication for SMEs
6.1.1
The EESC welcomes the proposal to bolster information to financial intermediaries and to
encourage banks and financial institutions to provide their clients with all the necessary tools
to help them find financing. Furthermore, the EESC considers it important to boost financial
education for SMEs. Member States are strongly encouraged to participate in that exercise by
setting up specific "investment readiness" programmes for SMEs in close cooperation with
SME organisations.
6.1.2
One of the major problems for the vast majority of SMEs is that of access to specially tailored
advice. The EESC supports the principle and the role of the Enterprise Europe Network
(EEN) yet considers that its potential should be fully used 15 . Consequently, the EESC
suggests strengthening the financial advisory capacity of the EEN. It stresses, however, that
SME organisations must be closely involved in this campaign as well and that it should be
tailored to highlight the diversity of SMEs.
6.2
Improve monitoring and data collection of the SME financing market
6.2.1
The Committee notes that the Commission has already worked on this issue ((SMEs' Access
to finance surveys and SME Finance Index). It welcomes the proposal from the Commission
to work more closely with bank federations and to gather advice from other institutions (ECB,
EBA). The EESC recommends involving SME organisations and institutions at Member State
level too. The EESC regrets that the Action Plan does not refer to reinforce cooperation with
international organisations such as the OECD to produce data and statistics16 on access to
finance.
6.3
Qualitative rating
6.3.1
Purely quantitative rating models are often not suited to the evaluation of SMEs because they
are too rigid. Using qualitative factors in addition to the common quantitative analysis is more
than welcomed. Banks could therefore consider balancing their scoring methods for assessing
SMEs' credit-worthiness with adequate room being left for “relationship banking”. This issue
15
16
OJ C 376, 22.12.2011, p. 51, OJ C 181, 21.06.2012, p. 125.
See examples such as "Financing SMEs and Entrepreneurs 2012: an OECD scoreboard" (http://www.oecd-ilibrary.org/industryand-services/financing-smes-and-entrepreneurship_9789264166769-en).
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- 10 also needs to be addressed by exchanging best practices. The EESC regrets that some banks
seem to be moving away from this idea rather than promoting it.
6.4
Business Angels and other early stage actors
6.4.1
The EESC believes for instance that it is important to develop the link between business
angels and early stage VC funds with later stage venture funds in order to ensure a healthy
innovation finance chain. Moreover, initiatives to support greater dialogue at regional level
between business angels, VC funds and local entrepreneurs are strongly encouraged.
6.4.2
Innovative approaches to venture funding ought to be looked into and implemented. One such
approach is crowd funding, in which citizens, and not banks or specialists, invest in SMEs
through an online platform, instead of the stock exchange market.
6.4.3
Tailored forms of hybrid capital17 containing elements of grants, equity and debt capital (such
as profit sharing loans) should be strengthened, because they suit SMEs better both in the
early stages and throughout their life cycle.
7.
Other recommendations to secure SME finance
7.1
Best practices in the banking sector
7.1.1
Consideration should be given to developing a framework within which credit could be
encouraged from lenders operating on the basis of a philosophy of risk- and profit sharing,
since SMEs could certainly benefit from it. Phenomena such as participatory banking should
be seriously considered by the Commission. The EESC would like the Commission to prepare
a Green Paper as a basis for launching a debate on participatory banking at European level.
Separate initiatives taken by countries such as the UK, France, Germany, Italy, Luxembourg
and Malta are positive but may hinder further integration of the financial services industry
within the EU. Furthermore, separate non-coordinated initiatives may not give the most
efficient outcomes that this type of finance could achieve, such as risk sharing, profit sharing
and a social approach to finance. The encouragement of micro-finance with specific
investment policies referring to Islamic finance could also give rise to new entrepreneurial
activities whilst helping to fight poverty in certain regions. In this context, a Commission
communication envisaging, addressing and encouraging alternative financing methods should
be developed to ensure that these are on a level playing field with financing methods such as
conventional finance.
7.1.2
The EESC takes note that the Commission has analysed the work and the results obtained by
credit mediators as well as problems faced by SMEs in their search for loan finance18. The
17
18
http://www.schwabfound.org/pdf/schwabfound/SocialInvestmentManual.pdf.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/1186&format=HTML&aged=0&language=EN&guiLanguage=en.
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- 11 EESC invites all Member States to create such a function in order to improve transparency in
the lending process. The Committee notes that Article 145(4) of the Capital Requirements
Directive (CRD III), and Article 418 (4) of the proposed Capital Requirement Regulation
(CRD IV) include provisions that allow SMEs to ask banks to inform them of their rating and
scores. It would be important to fully implement these provisions in practice.
7.1.3
With regard to competition in the banking sector, the EESC asks the Commission to study the
situation and ensure that there is enough competition in the banking sector within and
between the different Member States in the field of financial products for SMEs. For
example, there is the problem of funding loss (see below); at the same time, overdraft rates
for small enterprises remain at a very high level, even though ECB bank refinancing interest
rates are at a historically low level. Big companies can use alternatives (such as straight
loans), but small enterprises cannot use these products.
7.1.4
Funding loss: In many Member States, charges are levied on businesses by banks when they
repay their loans ahead of schedule. Whenever a loan is paid back earlier than envisaged in
the contract, the bank charges this so-called "funding loss" fee to compensate for the fact that
the bank might have to re-invest the money at a lower interest rate than the one they would
have got if the loan was not paid back earlier than expected.
7.1.5
The problem, however, is that these funding loss charges are often quite high. Moreover,
these charges are often not very clearly explained in the contract, which also refers to future,
as yet unknown interest rates. This makes it very difficult for a business to estimate the
possible funding loss charge in the event of early repayment. In any case, most businesses are
not even aware of the obligation to pay a funding loss charge.
7.1.6
It is therefore crucial for banks to provide clearer information on such charges before any loan
agreement is signed. In addition, the amount of the funding loss charge should be limited and
reasonable.
7.2
Visibility and administration of European programmes for SMEs finance
7.2.1
The EESC is in favour of creating a single multilingual online database of different sources of
finance, integrating European, national and regional measures to facilitate SMEs access to
finance. The Committee invites the Commission to disseminate widely the practical guide19
that it drew up providing information on how to access € 50 billion of public finance in the
27 Member States.
7.2.2
The EESC is of the opinion that, with regard to the "Horizon 2020" programme, a dedicated
budget of 15% of the overall programme and a single management structure are key to
19
Final Report, Evaluation of Member State Policies to facilitate Access to Finance for SMEs, – June 2012
http://ec.europa.eu/enterprise/policies/finance/guide-to-funding/indirect-funding/files/evaluation-of-national-financing-programmes2012_en.pdf.
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- 12 making the most of the innovation potential of SMEs. As regards the procedure,
improvements must be made concerning financial and administrative issues. For instance,
many SMEs participating in EU-funded research projects still face enormous VAT-related
issues in their respective countries when participating in projects. Very often this is one of the
main stumbling blocks to those actually participating from the start. Clear regulations
relieving SMEs of these burdens should be implemented in all Member States. VAT should
be recoverable in all circumstances in EU funded projects.
Brussels, 19 September2012
The President
of the
European Economic and Social Committee
Staffan Nilsson
_____________
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